Marty Whitman's Third Avenue funds has just released its first quarter (ending January 31st) of 2013 shareholder letter. Unlike many other letters which consist mostly of charts and numbers this one from Third Avenue has pages of detailed discussion on holdings, economy, value investing etc. from the PMs. Marty Whitman has an interesting take on the Dow nearing the highs of 2007 and the differences between now and then. Brief excerpt from Marty Whitman followed by the full document embedded in scribd:
The last time the Dow Jones Industrial Averages approached the 14,000 level before January 2013 was October 2007. However, at January 31, 2013, the Index or Weighted Book Value of the 30 stocks in the Index was 66.3% larger than it had been at October 31, 2007.
More importantly, in 2013, the quality of the balance sheets of publicly-traded companies (and therefore their credit-worthiness) seems to have become manifestly better than it had been in 2007. For example, cash holdings of the companies in Standard & Poor’s 500 Stock Index had by 2012 increased to almost $1.8 trillion, from under $1.2 trillion in 2007.
Also, it is likely that companies whose common stocks are in the Third Avenue portfolios are much more efficient operations-wise today than they had been in 2007.